Australian pension funds shift to active ownership — Interview

By Alice Uribe

SYDNEY – Australian pension funds are increasingly taking action on the environmental, social and governance issues they see in the companies they invest in, and that can have a bigger impact than just investing in “green assets.” “, said KPMG.

According to Linda Elkins, national head of asset and wealth management at KPMG in Australia, funds working as active owners to help push businesses to transform can be more powerful than simply investing in assets that contribute to the low carbon transition.

“I’m sure both are great things to do,” she said in an interview this week. “But you would think that being that active investor is a very powerful and important thing that super funds can probably do, especially when associated with certain industries, like energy or coal-related industries. role they can play in promoting…these industries to be transformed is important.”

Australian pension funds increasingly see the use of shareholder resolutions and other methods of activity as important levers to incentivize the companies they invest in to improve their responses to ESG issues.

A 2021 report from the Australasian Center for Corporate Responsibility found that Australia’s top 50 pension funds voted in favor of a variety of ESG shareholder proposals in 42% of cases in 2020, down slightly from 43% in 2019, but up significantly from 34% favorable proposals. support in 2017.

The ACCR said that since its first report in 2019, it has “seen growing acceptance of the role of shareholder resolutions as a key element of active management”, with ESG resolutions increasing in number and impact.

“It moved the conversation beyond applying and integrating ESG principles into value creation and into implementing strategies, such as active ownership principles, to drive change in the real world,” the ACCR said in the report.

In a recent example of active ownership, AGL Energy Ltd. this week scrapped the split of its power generation and retail units into separate businesses after opposition from investors including billionaire Mike Cannon-Brookes and Australian pension fund Hesta.

AGL needed 75% of shareholders to approve the proposal for it to pass. Mr Cannon-Brookes holds an 11.28% stake through his investment fund Grok Ventures and had asked shareholders to oppose the move. Australian pension fund Hesta said it would not vote its 0.36% stake in favor of the split because the plan was not in the best interest of its members.

“The events at AGL represent a turning point in active ownership in this country. Shareholders are pushing for greater action on climate change and a faster transition that aims to improve the company’s ability to create value. long-term sustainable value,” said Debby, Managing Director of Hesta. said Blakey.

“We cannot simply divest ourselves of the risk that Australia is slow to transition to a low-carbon future. Responsible investors have a responsibility to their members to go to where the greatest emissions are and, in As owners, try to change the behavior of these companies first.”

Between 2017 and 2020, the ACCR found that nine Australian pension funds supported a majority of ESG proposals, including Australia’s largest fund AustralianSuper in 51% of cases and Hesta in 65% of cases.

Listening to ESG issues can also be a differentiator for pension funds when it comes to attracting members, Ms. Elkins said, with many members having a preference or expecting their funds properly manage ESG issues.

“Young people will report in research that it’s important for them to know how their funds invest, or that they can choose ESG options. But it’s not just young people…members want choice, or want to know from their default position that their fund is focused on ESG issues,” she said.

“And we find that funds that focus on these issues don’t come at the expense of delivering sustainable results for members over the long term through fees and performance.”

Write to Alice Uribe at [email protected]